LONDON (ICIS)--Scandinavian fertilizer major Yara on Wednesday confirmed that around 40% of its European ammonia production capacity - some 1.9m tonnes/year - remains curtailed due to a spike in natural gas prices.
Plants in several countries have reduced output or halted production leaving around 2.9m tonnes/year of European capacity untouched, the Norwegian major disclosed.
In sharp contrast, Yara's ammonia plants in other regions - which generate a combined 3.6m tonnes/year - are running normally.
"The gas price spike in Europe meant we had to curtail significant ammonia capacity towards the end of Q3, including both scheduled maintenance and market driven curtailments," said Svein Tore Holsether, president and CEO.
"Yara’s high operational flexibility allows unprofitable ammonia production to be replaced with sourcing from Yara plants outside Europe, and from Yara’s global ammonia trade and shipping network.
"The impact on finished fertilizer production has been limited so far, but Yara is closely monitoring the situation going forward.
"The current situation clearly demonstrates the need for more resilient food supply chains, and I call on authorities, international organisations and food value chain players to work together to secure global food supply."
In notes accompanying its Q3 results, Yara revealed gas costs for the current quarter and Q1 2022 could jump by $850m and $950m year on year respectively.
"However, Yara’s ammonia curtailments in Europe are reducing purchased gas volumes, and the cost impact will therefore depend on the duration of the curtailments," the group stated.
Yara revealed that it purchases approximately 40m MMBtu per quarter in Europe and that gas costs "may also change depending on future spot gas prices and local terms."
Ammonia production is an energy intensive process requiring a minimum of 33MMBtu of natural gas to produce a single tonne of the nitrogen fertilizer, meaning that European manufacturing costs currently top $1,000/tonne.
Along with Yara, major European producers including OCI, BASF, Grupa Azoty and Fertiberia have announced capacity curtailments in recent weeks, with replacement volumes sourced from north Africa and the Americas.
Yara has ramped up shipments from its operations in Trinidad in response to the European feedstock crisis, with 60,000 tonnes from the Caribbean loading so far this month for downstream units in Norway and France.
The group is poised to load the liquefied petroleum gas (LPG) tanker Yara Kara with 13,700 tonnes at Point Lisas in western Trinidad, while the 25,000 tonne capacity Yara Freya is scheduled to load on 1 November after a delivery to France and Germany.
Destinations for both vessels are unconfirmed, but the pair are expected to head to northwest Europe.
Next week, Dutch major OCI will load another Texan cargo for discharge at Rotterdam in November, with additional material sourced from its plants in Algeria and Egypt also set to head to the Netherlands soon.
Despite a strong third quarter, Yara swung to a $143m net loss from a $340m net profit in the year-ago period as it suffered a $355m impairment of the Salitre phosphates project and a currency translation loss of $148m.
On 1 August, Yara signed a deal with Switzerland-headquartered EuroChem to sell that Brazilian fertilizer mining project for a cash consideration of $410m.
The Yara Kara will load an ammonia cargo at Point Lisas soon, and it almost certainly bound for Yara's downstream fertilizers units in northwest Europe. Photo courtesy of Yara.